Should I Invest in Fractional Gold?

Is less gold per ounce worth the investment?

Fractional coins are bullion coins that contain less than one troy ounce of gold or silver, and they serve as an alternate way to invest in precious metals. In fact, most coin releases are available in sizes that are less than one troy ounce.

Why would one invest in fractional gold coins? Here’s a look at what makes these coins different, along with a few pros and cons of choosing fractional gold pieces as investments.

What is Fractional Gold?

Fractional gold, simply put, is any coin or round that contains less than the standard minimum of one troy ounce of gold. The most common denominations for fractional gold coins typically contain 1/2, 1/4, or 1/10 of an ounce of gold; however, any amount less than one ounce is considered fractional. As the amount of gold decreases, the price of the coin also decreases.

Advantages of Fractional Gold

Even though fractional gold coins contain less gold, there are still pros to purchasing these coins as investments:

Cost. One of the best arguments to buying fractional gold coins is the lower cost. The price of gold coins of a larger weight can be pretty steep, and can be quite a financial investment if you decide to make collecting bullion coins a hobby.

Collection building. Buying bullion in smaller sizes means you can purchase more coins at a lower price for each, and doing so can help you build a more well-rounded gold collection or investment portfolio.

Flexibility. Trading your gold coins can be hard, especially if your entire collection consists of one or more troy ounce coins. If you’re looking to trade in a bit of your gold for cash without letting go of your more expensive pieces, fractional gold coins give you a cheaper option for doing so.

Trading and bartering. Fractional gold coins are typically easier to liquidate, and bartering with these coins can also lead to great trading opportunities that may not be possible with larger gold coins.

Supply and demand. If the price of gold rises, demand for fractional gold coins is likely to increase too. Since larger coins are more populous, having some fractional gold pieces could provide excellent selling opportunities in the future.

Economic crash. In the event that the economy crashes, fractional gold coins would be much easier to trade for typical goods and services than larger coins. Larger coins would trade for more than would be needed for smaller purchases.

Disadvantages of Fractional Gold

Despite the perks of smaller gold ounce coins, fractional gold does carry a few cons as well. These disadvantages include:

Higher markup price. Fractional gold coins cost the same to mint as coins containing more gold. This means that fractional gold coins will likely have a higher markup price in relation to their purchase price than bigger coins (anywhere from 9 to 15 percent typically). A one troy ounce gold coin will usually have the lowest markup price of all, which is one reason this option is so appealing.

High premiums. Fractional gold coins are often marked with higher premiums too; such high premiums, in fact, that it can dissuade some collectors from investing in them and opting for a typical one troy ounce coin. Typical premium markups range between 9 and 15 percent for fractional gold coins.

Overall, while the higher markup price is not desirable, fractional gold coins do make excellent investment pieces and can provide a means of investment for those looking to spend less than $1,000 on precious metal bullion coins. Additionally, many collectors agree that investing in fractional gold coins makes for a more well-rounded collector’s portfolio.

Whether you’re interested in making a fractional gold coin your next investment piece, or you would rather stick with one troy ounce coins, Provident Metals has a variety of options to meet your needs. Feel free to browse our gold bullion selection to find your next investment piece.

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